Vietnam's foreign exchange reserve hits record height

By An Le
Mon, March 14, 2022 | 8:03 am GMT+7

Vietnam’s foreign exchange reserve recorded an all-time high of $109.9 billion in 2021, according to the State Bank of Vietnam.

The figure is an almost ten-fold increase over 2010 ($12.4 billion), nearly four times higher than 2015 ($28.2 billion), and are likely to rise in the next years in line with the country’s economic development, it said in a report.

Vietnam's imports reached $332.23 billion last year. That means the $110 billion in foreign exchange reserve is equivalent to about 17 weeks of imports, significantly higher than the previous years' level of 9-12 weeks.

According to the IMF, the minimum foreign exchange reserve of a country should be 8-12 weeks of imports, and 16-24 is a high figure.

Vietnam's foreign exchange reserve last year is equivalent to about 17 weeks of imports, a high figure according to the IMF's standards. Photo by The Investor/Trong Hieu.

Vietnam's foreign exchange reserve last year is equivalent to about 17 weeks of imports, a high figure according to the IMF's standards. Photo by The Investor/Trong Hieu.

The central bank attributed synchronous macroeconomic management solutions and flexible usage of monetary policy management tools to the good reserve.

The country's foreign exchange supply shifted from scarcity to surplus, which not only met import needs but also contributed to improving the international balance of payments surplus and adding foreign currency to the foreign exchange reserve.

Dao Minh Tu, SBV's Standing Deputy Governor, said remittances, an important source of foreign currency, rose 10% to $12.5 billion last year.

FDI, including capital of newly-licensed projects, additional capital of operational projects and capital contribution for acquisitions, rose 9.2% in 2021 to $31.15 billion, despite the fallout of Covid-19.

Another source of foreign currency is export, which reached $336.31 billion, up 19% against 2020. The country had a trade surplus of $4.08 billion in 2021.

A high foreign exchange reserve assists in strengthening national security and confidence of domestic and foreign investors, as well as preventing external impacts. A high foreign exchange reserve and a balance of payments surplus are favorable conditions for the SBV to maintain the exchange rate’s stability.

A high FX reserve also ensures the country’s solvency in the event of a currency crisis and is utilised to intervene in the domestic foreign currency market in compliance with national monetary policy objectives.

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